Minor Thoughts from me to you

Creating Wealth Through Innovation

Wealth is created every day. Wealth is created when someone creates something new and fulfills a need that other people didn't even realize was unfulfilled. Wealth is created when someone figures out how to produce an existing product faster or cheaper than it can currently be produced. Individuals innovate for several main reasons: to fulfill a need of their own, to save money, or to fulfill a need revealed by others.

Fulfilling these needs can often make an innovator very rich. Liberals come along and tax it all away for the greater good of society -- but that's another blog post.

Robert Jordan is a recent Wisconsin success story.

Robert Jordan's 20-year career as a long-distance trucker involved a lot more than hauling cheese.

After buying his own truck in 1993, he used the cab as a mobile laboratory to experiment with energy-saving ideas that would cut expenses and put more money in his pocket.

Now those experiments are paying off. Jordan, 51, of Juneau, has patented a battery system to run a truck's electronic equipment so idling isn't necessary. He's started a business called Idle Free Systems and negotiated agreements with Mack Trucks and Chiquita Brands to use his system.

With three employees, Jordan moved this month into manufacturing space in Watertown. He said he hopes to sell about 200 units this year at $6,000 each, which would mean first-year revenue of $1.2 million.

You may think that shoe innovation has gone about as far as it can go. You may think that shoes are the most stable, dependable market available. You'd be wrong. Mark Klein discovered a completely untapped shoe market.

In late July, Mr. Klein's company, Skins Footwear, intends to break the shoe in two, giving it an outer part, including the sole and upper, which he calls a "skin," and a removable inner part, which he calls the "bone."

"The bone is the constant fit and feel," he says. "Then there's this blank canvas for you to express yourself with the skins.""

The idea is that a shopper will buy a bone, for about $60, and several skins, which will range from $125 to $300. People will shift from one skin to the next, depending on what they're doing, much the way they can with other kinds of apparel.

Mr. Klein, who is 33, says he thinks that his patented skin-and-bones concept will eliminate the problem people have with shoes that look good but don't fit correctly, since the bone should guarantee the same fit for any skin in that size. He also says frequent travelers will appreciate the chance to pack only the foldable, lightweight skins, instead of full pairs of shoes.

Sounds good to me. The suggested price points are a little high right now, but if they come down a bit I'd certainly be willing to buy a bone and some skins.

Speaking of shoes, check out Masai Barefoot Technology created by Swiss engineer Karl Müller.

In the early 1990s, Swiss engineer Karl Müller realized that both shoes and backache are unknown to the Masai tribesmen - and that there is a causal connection between these two facts. By walking barefoot on the natural, soft, uneven ground of their East African homeland, the Masai activate also those muscles that atrophy when on walks on hard, even surfaces wearing conventional shoes.

During a visit to Korea he made the startling discovery that walking barefoot over paddy fields alleviated his back pain. Back in Switzerland, Müller began to develop a footwear technology that would make the natural instability of soft ground such as Korean paddy fields or the East African savannah accessible also to those, who have to walk on hard surfaces. In 1996, after years spent on research and development, Masai Barefoot Technology was mature enough to be launched on the market. MBTs are now available in over twenty countries, and approximately one million pairs of this revolutionary footwear technology are sold every year.

Speaking of Africa, the next story caught my eye because it mentioned the ideological division between those that want to help Africa through trade and those that want to help Africa through aid. (I wrote about African aid and trade just a few days ago.) As I read through the story, however, I discovered a great story of risk and innovation.

In 1997, Mr. Conteh recalled in an interview, he heard Laurent D. Kabila, then the country's president, deliver a speech in which he called upon his countrymen to rebuild Congo's infrastructure after the 30-year dictatorship of Mobutu Sese Seko. Mr. Conteh, who had no experience in telecommunications, said he was inspired. He decided to build the nation's first GSM (Global System for Mobile communications) digital network.

Mr. Conteh said he went, cap in hand, to the minister of communications to ask for the country's first GSM license. In January 1998 he got it "” but he first had to pay the government a license fee of $100,000. Over the years, and with little explanation, he said, the government, which is often terribly short of money, increased the license fee, first to $400,000, then $2 million.

Throughout the early days of his company, Mr. Conteh faced challenges unknown to Western businesses. Once, after equipment providers declined to send engineers to Congo during a dangerous time in the country's unending civil strife, he encouraged the citizens of Kinshasa, the capital, to collect scrap metal and weld them into a cellphone tower.

By the middle of 2006, Vodacom Congo had more than 1.5 million subscribers, according to Vodacom's annual report. Today, Mr. Conteh says, the company he founded has more than three million subscribers who have spent, on average, around $50 for a handset and who prepay about $2 for every five minutes of talk time. He says a recent offer for his shares valued Vodacom Congo at more than $1.5 billion. (He refused to name the interested party.)

Mr. Conteh is building a telecommunications network where none existed before. With 600 employees and 5,000 contractors, Vodacom Congo is one of his country's biggest employers. If he realizes his ambition to create a stock market and offer shares in his company, he will have created new wealth.

Wow. That's impressive. All four of these stories are impressive. All four of these stories are also great examples of how wealth is really created. Be wary of those who would promise wealth through redistribution. True wealth comes from innovation, not redistribution. Rather than focusing on shifting around existing wealth, we should be focusing on creating new wealth. These four men vividly demonstrated how it works.

This entry was tagged. Capitalism Innovation